Judge to Dell: Dude, you’re defrauding your customers!

Dell is guilty of fraud, false advertising, deceptive business practices, and …

The New York State Supreme Court has dealt a blow against Dell by ruling that the company and its affiliate, Dell Financial Services, engaged in fraud, false advertising, deceptive business practices, and abusive debt collection practices.

Justice Joseph Teresi ruled against the companies late last week, saying that Dell repeatedly misled customers and failed to live up to promises. The monetary damages have yet to be determined, but New York Attorney General Andrew Cuomo said that Dell will eventually have to pay back customers. The company will also have to turn over any "unlawfully earned" profits to the state.

"For too long at Dell the promise of customer service was a bait and switch that left thousands of people paying for essentially no service at all," Cuomo said in a statement. "We have won an important victory that will force Dell to live up to its responsibilities and pay back its customers for profits that were pocketed but not deserved. This decision sends an important message that all corporations will be held accountable for the promises they make to consumers."

The list of things that Dell did to deceive consumers is fairly long. To start, the company lured in customers by running attractive promotions offering no-interest or no-payment financing options, but then only approved a very small percentage of those who applied (only seven percent, according to the complaint submitted by Cuomo on behalf of New York residents, which is significantly lower than Dell's typical approval rate).

That's not all, though: Dell didn't actually inform those who didn't qualify that they didn't qualify—in fact, the company even congratulated disqualified customers for qualifying—and instead signed them up for much less attractive financing rates behind their backs. "Dell has engaged in prominently advertising the financing promotions in order to attract prospective customers with no intention of actually providing the advertised financing to the great majority of such customers. Such conduct is deceptive and constitutes improper 'bait advertising,'" wrote the judge in his decision (PDF).

Next, Dell apparently engaged in deceptive and false advertising regarding its "next day" tech support service. The company failed to disclose to customers that they needed to disassemble their machines on their own before such service could be provided—much more than any average consumer would be able to do properly.

Customers also complained of long hold times on the phone, frequent transfers to different departments, numerous disconnections, and the need for repeated calls. In many cases, Dell refused to provide service because it had not yet determined which parts needed to be replaced over the phone (due, in part, to customers' inability to properly diagnose their own hardware after taking it apart). Some customers complained that Dell eventually denied them service because their warranties had expired, even though they attempted to make the complaint before the expiration date. Judge Teresi said that customers had sent affidavits saying that it took them weeks, months, and sometimes even years to receive Dell's "next day" service.

The complaints go on. Dell repeatedly refused to honor rebates in cases where customers submitted all of the required paperwork in a timely manner, reflecting an "alarming pattern," according to the court. Dell Financial Services also threatened numerous customers that it would report "late payments" to credit reporting agencies, even after customers had returned equipment to Dell for a refund. Finally, DFS incorrectly billed customers for canceled orders in a number of cases.

"Dell has engaged in repeated misleading, deceptive and unlawful business conduct, including false and deceptive advertising of financing promotions and the terms of warranties, fraudulent, misleading and deceptive practices in credit financing and failure to provide warranty service and rebates," concluded Teresi in his decision.

Dell, of course, maintains that it is committed to providing the best possible customer service. The company also disagreed that the findings were as widespread as Cuomo would have us believe. "We are confident that when the proceedings are finally completed, the court will determine that only a relatively small number of customers have been affected," Dell spokesperson Jess Blackburn told CNN.